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ch 2 - I Analyzing and recording transactions A Learn a...

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I. Analyzing and recording transactions A. Learn a formal way of evaluating a transaction, recording a transaction and generating a report II. The account and its analysis A. Account: a record of increases and decreases in a specific asset, liability, equity, revenue or expense item 1. Changes in accounts must still result in a balanced accounting equation a) Assets = liabilities + equity 2. Each component in the accounting equation is made up of many subcomponents or accounts 3. Types a) Asset: resources owned by a company * Ex: land, cash, accounts receivable, supplies, equipment, buildings * Eventually get used up and then become expenses (Ex: as a building depreciated it becomes an expense) * Prepaid accounts (accounts in which the customer has paid in advance of receiving the good): when the good is delivered the amount of the good becomes an expense b) Liability: obligations owed by a company * Accounts and notes payable: increase when purchases are made on credit and decrease when the cash is delivered * Accrued liabilities: amounts owed but not paid; bills received but not processed (ex: taxes payable, utilities payable) * Unearned revenues: result when a customer pays in advance of receiving products, decreases when service is provided because this money is then transferred to revenues (opposite of prepaid account) c) Equity accounts: owners interest after liabilities and assets are paid off * Retained earnings, dividends, common stock, revenues (increase when a product is provide), expenses (increase as assets are exhausted and become expenses) * Are increased by common stock investments and by increases of revenue * Are decreased by dividends and expenses
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III. Ledger and chart of accounts
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ch 2 - I Analyzing and recording transactions A Learn a...

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